Going to bed…

We will go to bed with Gold at $1,500 and wake up with it $4,000 bid… and nothing offered.

-Reg Howe (many of you know him, some of you don’t but we all owe him a debt of gratitude)

This quote by Mr. Howe sounds crazy. It sounds impossible and sounds like the rantings of a raving lunatic right? Well, no it doesn’t. Actually, I believe that something resembling this will not only happen but has to happen. Logically, mathematically and just pure structurally an event very similar is locked, loaded ready for the trigger to be pulled. But how can I say this?

All you have to do is look at the supply and demand of both gold and silver. We know now that “new” supply has not met demand for years, at least 20. We know from export data from the U.S. (courtesy of detective work by Eric Sprott) that 4,500 tons of gold has been exported from U.S shores since the mid ’90’s and that just the first 2 months of this year 130 tons were exported (courtesy of Harvey Organ’s detective work). But how can this even be? The U.S. only produces just under 250 tons of gold per year. How could we have exported 130 tons in January and February if our mines only produced 40 tons? How could we have exported 4,500 tons over the years if we only produce 240 tons per year? We know that the mint uses gold, jewelry has been produced each and every year and so has industry for various applications. So how is this possible? Where did the gold that we know was used and are told was exported come from if the “total” is far and beyond what we produce… every single year?

Let me backtrack just a little bit. We are also seeing big movements of inventory reporting. The COMEX has been bleeding down both gold and silver inventories as have the ETF’s GLD and SLV. Deliveries are being made and inventories are declining at the same time that we are being “told” that no one wants gold or silver based on their price actions. We are being told that they are THE most hated investments on the planet and the prices are crashing. But why then are physical prices trading above the paper prices and who in their right mind would be taking deliveries? …And why would they be taking deliveries in such big portions?

Add to the above the anecdotal evidence from India that they are now only getting 10% of their orders or the Shanghai exchange making huge deliveries through April and now in May they have delivered almost nothing. Huge demand in China, India, Dubai and the UAE, throughout Europe and in the U.S, did I forget anyone? Or what about ABN Amro informing their customers that “no more physical deliveries will be made?” Why are there premiums to get the real thing instead of just being “happy” with paper receipts? Why did Germany ask for their gold back and why are the Swiss doing a referendum on the same? There are many more pieces to this puzzle but you get the gist, something really weird (fraudulent) is going on here because the numbers don’t (have not for years) add up and there are huge movements of inventories in the face of exploding demand (and crashing prices) all over the world.

Something big, REALLY big is happening behind the scenes that we are not “privy” to but… you don’t have to be a rocket scientist to know where this is going. As I started this piece with a quote from Reg Howe, “You will go to bed with gold at $1,500 and wake up with it bid at $4,000 and none offered.” The point is this, something has and is changing with the supply demand situation in the precious metals. We know that demand has exploded, inventories are being drawn down and that investor appetite is to have the metal delivered, no more “I think I’ll just leave it with my ‘trusted’ custodian.” No, it is now cash and carry and many of those who had previously purchased are only now getting around to the “carry” part.

So, in case you were wondering what the “answers” are and what exactly has changed I will tell you that only the “insiders” know for sure. Well, that’s not exactly correct but the “insiders” have apparently seen the bottom of the barrel with their own eyes. “We” on the other hand can only deduce and logically “know for sure” based on all of the evidence. I think that it is safe to say that the game is coming to an end. The U.S. who has acted as “custodian” for much of the world’s gold since WWII is running out of gold to deliver. Sadly, if you put all of the numbers together on a piece of paper you can deduce that we are probably not only running out of our own gold, but also gold that we were entrusted with as custodian.

I will leave you with this one thought. I’m sure that you have heard about the toilet paper shortage in Venezuela. What do you suppose the value of one roll of tp is worth to a Venezuelan? …And if the government fails to obtain more like they say they will, what then? What would the value of one roll be then? $5? $10? 50 DOLLARS? Or… to someone who is rich, really rich, could a roll of toilet paper really be worth $100? Good questions huh? Wait, not really, the real question is whether someone would part with their last roll of toilet paper for 100 U.S. American Dollars! Now ask yourself, “In a financial system that is collapsing where banks are closed and ATMs and credit cards no longer work… would you sell 1 ounce of Gold for $4,000? Or will that maybe be the bid but… “none offered?”

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